About Me

Friday, April 15, 2016

Several issues related to rice farming and trading in the
Philippines hogged the news recently. The first of course is the big El Niño
and crop failure in many provinces in the country and many other tropical
countries. Second, the farmers’ rally in Kidapawan, Cotabato that turned bloody
early this April. And third, on large-scale agricultural smuggling including
rice.

The 2015-2016 El Niño indeed was huge, reaching up to 2.5
Celsius deviation from the average temperatures, but it is comparable to the
1997-1998 El Nino (see graph).

The Kidapawan rally that claimed two dead rallyists and
two policemen in coma was unique because while this El Niño also adversely
affected many provinces in the country, there was no highway occupation for
days and bloody demonstration that occurred.

On the third item, Dr. Ben Diokno in his column here in
BusinessWorld last April 6, 2016, quoted Bobi Tiglao’s numbers saying that
“smuggled value averaging $19.6 billion annually, an explosion from the
comparable figures of $3.1 billion and $3.8 billion yearly during the terms of
Presidents Joseph Estrada and Gloria Macapagal-Arroyo, respectively.”

These three and related events in rice farming have
become part of the issues raised by Presidential, Vice-Presidential and
Senatorial candidates running for the May 2016 elections. We discuss these
issues by asking these questions:

1. Is this El Niño so bad and “unprecedented” that
prompted many people to demand doubling, even quadrupling of government
spending in agriculture to help “fight man-made climate change”?

2. Is rice “self-sufficiency” a valid must-goal for the
Philippines and hence, demand massive reallocation of resources from other
sectors to agriculture in general and rice farming in particular?

3. Is continued rice protectionism valid, and
agricultural smuggling really that bad against the Philippine economy and the
consumers in particular?

From Graph 1, the answer to #1 is No. This big El Niño
has a precedent, the most recent was the 1997-1998 El Niño and consistent with
natural weather and climate cycles, we should expect another big La Niña to
follow later this year like what happened in 1999-2001. That means another
round of heavy rains and flooding that can cause another round of huge crop
damages.

To answer question #2, the numbers here will help (see
table).

From the above numbers, the answer to #2 is another No.
Our neighbors Thailand and Vietnam simply have plenty of rice land, around two
times that of the Philippines, in contiguous and single land mass, with access
to huge irrigation from Mekong River, Ton Le Sap River, other huge rivers that
provide huge irrigation.

The Philippines has a comparatively small rice land area,
slowly being converted to residential, commercial and industrial uses. Being an
archipelago, there are very few large rivers that can provide continuing
irrigation to wide rice lands.

Besides, Thailand and Vietnam get perhaps only about 1/5
of the number of typhoons that enter the Philippines, average of 20 typhoons a
year, about half of which make actual landfalls and cause more damages and crop
losses. These two countries are also done with their agrarian reform and forced
land redistribution; the Philippines is not done yet, after 43 years of
implementation, starting only in 1972 Marcos’ land reform, not counting earlier
land reform programs.

So forcing rice “self-sufficiency” cannot be a valid
goal. Instead, pursuing rice “food security” is more appropriate. We continue
producing more rice with the help of more modern technology, and any deficit
can be filled by rice importation at free trade, lower prices from our ASEAN
neighbors.

And the answer to question #3 is another No. This is not
to justify rice smuggling but bringing in cheap rice from Thailand and Vietnam
and other ASEAN countries is pro-poor and pro-consumers, like the carinderia
owners and customers (especially jeepney and taxi drivers, students, job
seekers).

The government rice protectionism policy -- via rice
quantitative restrictions (QR), imposition of 35% tariff for imported rice, the
National Food Authority (NFA) rice importation monopoly -- is both anti-poor,
anti-consumers. For many Filipinos, they want cheap rice, and such is readily
available from our neighbors Vietnam and Thailand, and soon, Cambodia, Laos,
possibly Myanmar.

The following are reform measures that the next
administration may consider.

One, if the government should insist on rice
“self-sufficiency,” then it should allow corporate, large scale rice farming.
Economies of scale, tapping the knowledge and services of plant scientists and
geneticists, use of more farm mechanization, will greatly improve the country’s
rice output. Double or triple the current four tons per hectare average output,
coupled with reduce post-harvest losses.

Two, decouple NFA’s marketing/proprietary and regulatory
functions. Privatize the former and retain the latter, sell many NFA assets
like warehouses, use the fund to help reduce huge NFA debt, about P155 billion
as of mid-2014. Assuming a 3%-4% interest rate, we are paying around P5 billion
each year on interest payment alone for the NFA debt.

And three, liberalize rice importation by removing NFA
importation monopoly delegated to licensed importers and traders, removing the
QR for rice, and significantly cutting the import tariff of 35% down to 5% or
even zero.

Postscript on the Kidapawan demonstration: (1) The
majority’s freedom of mobility is superior to rallyists’ freedom of assembly.
Highway occupation and closure is wrong. To remove the conflict between these
two freedoms, mass actions and demonstrations should be held in public plaza,
or idle farms near big roads and highways. And (2) use of live bullets by the
police to disperse the crowd is wrong. The state should be above the fray and
avoid killing its people as much as possible, regardless of the provocation by
rallyists. Exceptions would be when firearms are explicitly displayed and fired
by the demonstrators against the police, the public, shops and other civilian
structures.

Bienvenido S. Oplas, Jr. is the President of Minimal
Government Thinkers, a SEANET Fellow and member of the Economic Freedom Network
(EFN) Asia. minimalgovernment@gmail.com